CHEONG MING INVESTMENT CO., LTD v. IBCL PROPERTY INVESTMENT LTD

DCCJ 1940/2021

[2022] HKDC 683

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 1940 OF 2021

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BETWEEN

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ASSESSMENT OF DAMAGES

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INTRODUCTION

1.  This is an assessment of damages arising out of the breach of a tenancy agreement entered between the plaintiff and the defendant, as well as the defendant’s wrongful interference with the plaintiff’s property. As a result of the breach and wrongful interference, the plaintiff claimed in its Statement of Claim various losses and damages, including (a) the outstanding rents, management fee and air-conditioning charges, additional air-conditioning charges, and government rates, up to the end of the term of the lease, (b) mesne profits, management fee and air-conditioning charges, and government rates up to the plaintiff’s recovery of the possession of the premises, (c) the repayment of rent for the rent-free period, and (d) the reinstatement costs.

2.  In absence of notice of intention to defend, the plaintiff obtained a final and interlocutory judgment against the defendant on 7 July 2021 for items (a) and (c) above, as well as for damages to be assessed[1]. This assessment hearing is held in pursuance of the said judgment.

3.  At the hearing, the plaintiff was represented by Ms Cherry Pang of Messrs Ford, Kwan & Company, the plaintiff’s solicitors. The defendant, who is not legally represented, did not attend the hearing. It was deposed in the 3^rd Affirmation of Service of Mok Chu Fai filed herein on 19 May 2022[2] that a sealed copy of the order made by the Court dated 6 May 2022 (whereby the present hearing was fixed) was sent to the defendant at its registered office address by ordinary post. After a brief recess, Ms Pang confirmed at the hearing that the said post was not returned undelivered. Accordingly, I was satisfied that the defendant has been duly notified of this hearing. I therefore decided to proceed with the hearing in the defendant’s absence.

4.  At the conclusion of the hearing, I indicated that I would hand down a written decision on 12 July 2022. This is my decision.

ANALYSIS OF EVIDENCE

5.  At the hearing, Ms Pang called Ms Ng Pik Kwan as the plaintiff’s factual witness. Ms Ng is the Officer – Leasing of the Chinachem Group, of which the plaintiff is a member. She adopted her witness statement filed on 31 January 2022 as examination in chief and confirmed the accuracy of the documents attached thereto. Ms Ng also answered questions raised by me. I accept that Ms Ng’s oral evidence was supported by the documentary evidence and inherently plausible. Having observed her testifying in the witness box, I find her to be a credible witness. I accept her evidence as set out in the plaintiff’s case below.

6.  Having considered their contents, I give full weight to the documents adduced before me by way of documentary evidence. I find that they are inherently plausible and consistent with one another.

7.  The defendant did not appear at the hearing and did not adduce any evidence contradicting the plaintiff’s case. In such circumstances, I accept the plaintiff’s evidence as unchallenged. I find that the plaintiff has proved its case as set out below.

PLANTIFF’S CASE

8.  The plaintiff is a company incorporated in Hong Kong and a member of the Chinachem Group. It is the registered owner of the premises known as the whole of 19^th Floor of Chinachem Century Tower, No 178 Gloucester Road Central, Hong Kong (“the Premises”) [3].

9.  By a tenancy agreement[4] (“the Tenancy Agreement”) entered between the plaintiff and the defendant, the plaintiff agreed to let the Premises to the defendant for a term of 2 years commencing from 26 March 2018 at the monthly rent of $126,000 (exclusive of management fee and air-conditioning charges, and government rates)[5].

10.  Insofar as this assessment of damages is concerned, three clauses of the Tenancy Agreement are pertinent. Clause 4.1 provides that[6]:-

“The rents reserved by this Agreement shall comprise both the calendar monthly rent stated in or ascertained in accordance with this Clause and the Management Fee and Air-Conditioning Charges (if any) payable in accordance with Clause 5.3 and are payable in advance without deduction or set-off at law or equity whatsoever and not to exercise any right to withhold payment on the first day of each and every calendar month (the first payment being an appropriate proportion, if the term shall commence on any other day than the 1^st day of the month.”

11.  Clause 5.2(b) provides that[7]:-

“To indemnify the Landlord on demand against all existing and future rates, Government Rent, taxes and outgoings of an annual or recurring nature assessed by the Government of Hong Kong or other competent authority and payable in respect of the Premises (Property Tax excepted).”

12.  Clause 5.3 further provides that[8]:-

“(a) To pay to the Landlord in the manner mentioned in Clause 5.3(b) the Management Fee and Air-Conditioning Charge (if any) as determined by the Manager.

(b)(i) The Tenant shall pay the amount of the Management Fee and Air-Conditioning Charges (if any) payable in respect of the Premises as stipulated in Part IV(ii) of the Schedule and Part VIII of the Schedule hereto.

(ii) The Manager may revise the Management Fee and Air-Conditioning Charges payable in respect of the Premises. There shall be no restriction on the number of occasions when the Manager may vary the Management Fee and Air-Conditioning Charges for the Premises.

(iii) The Management Fee and Air-Conditioning Charges shall be payable by equal monthly payments in the same manner as the rent is payable.”

13.  It was stated in Part IV of the Schedule to the Tenancy Agreement that the monthly rent of the Premises amounted to $126,000 and the management fee and air-conditioning charges were $14,000 per calendar month[9].

14.  According to the letters[10] issued by Chinachem Agencies Limited, the agent of the plaintiff, the management fee and air-conditioning charges were increased twice in August 2018 and September 2019. At the material times, the management fee and air conditioning charges amounted to $16,800 per month.

15.  According to the Quarterly Demand Schedules and Quarterly Demand Notes for Rates for the first[11] and second[12] quarters of 2020, the government rate of the Premises amounted to $17,400 per quarter. There was rate concession of $5,000 for each of these two quarters.

16.  At the hearing, Ms Ng confirmed that the plaintiff had duly paid the management company the management fee and air-conditioning charges, and the government the government rates.

17.  According to the plaintiff, the defendant remained to occupy the Premises without the consent of the plaintiff after the expiration of the Tenancy Agreement on 25 March 2020. The defendant only abandoned the Premises on 13 May 2020. The defendant therefore wrongfully occupied the Premises for 1 month and 19 days.

18.  It was also confirmed by the plaintiff that, since it was able to lease the Premises to a new tenant on an “as-is” condition, no reinstatement costs had been incurred by the plaintiff.

19.  In this assessment of damages, the plaintiff claimed against the defendant for a total sum of $236,999.50 for the period between 26 March 2020 and 13 May 2020, which include $203,225.81 being mesne profits, $27,096.77 being the management fee and air-conditioning charges, and $6,676.92 being the government rate.

LEGAL PRINCIPLES

20.  In her opening submission, Ms Pang relied on Halsbury Laws of Hong Kong[13] for the following propositions:-

“[235.489] The damages for breach of the express or implied obligation by the tenant to deliver up the premises on the determination of the term are not limited to the value of the land but are the amount of the real damage sustained by the landlord. This will include the rent of the premises during the time the landlord is kept out of possession; the reasonable damages and costs incurred by the landlord in respect of claims against him naturally arising out of the tenant’s failure to deliver possession.”

“[235.491] The landlord may recover in an action for mesne profits the damages which he has suffered through being out of possession of the land or, if he can prove no actual damage caused to him by the defendant’s trespass, the landlord may recover as mesne profits the value of the premises to the defendant for the period of the defendant’s wrongful occupation. Mesne profits, being a type of damages for trespass, may be recovered in respect of the defendant’s continued occupation only after the expiry of his legal right to occupy the premises…. They should be calculated on the basis of the rental value of the premises at the date of expiry of the lease, based on the best available evidence. The landlord is not limited to a claim for the profits which the defendant has received from the land, or those which he himself has lost. When the rent payable under the expired leased represents the fair value of the premises, mesne profits are assessed at the amount of that rent, but, if the real value is higher than that rent, then the mesne profits must be assessed at the higher value….”

21.  The last part of the second proposition is supported by the following dictum of Lord Denning:-

“When the rent represents the fair value of the premises, mesne profits are assessed at the amount of the rent, but, if the real value is higher than the rent, then the mesne profits must be assessed at the higher value.”[14]

22.  With these principles in mind, I now turn to the plaintiff’s claims in this assessment of damages.

DISCUSSION

23.  I am satisfied that the monthly rent of $126,000 is the prevailing market rental value of the Premises. This figure is not only the agreed sum in the Tenancy Agreement, but also the sum agreed between the plaintiff and the new tenant in the subsequent tenancy agreement[15]. Accordingly, I hold that the plaintiff is entitled to a sum of $203,225.81, namely $126,000 per month x (1 month + 19/31 days).

24.  At the hearing, I expressed my reservation in respect of the plaintiff’s claim concerning the management fee and air-conditioning charges, as well as the government rate. I now explain why.

(1) It should be firstly observed that, according to the plaintiff, the Tenancy Agreement came to its natural end on 25 March 2020. Accordingly, the plaintiff’s claim for mesne profits, the management fee and air-conditioning charges, and the government rate cannot be described as loss and damages as a result of the breach of the Tenancy Agreement[16]. Instead, it is clear from the facts of this case that these are losses and damages suffered by the plaintiff as a result of the defendant’s wrongful occupation of the Premises after the termination of the Tenancy Agreement. Ms Pang did not dispute this view at the hearing.

(2) In this regard, I recall the following dictum of Hoffmann LJ (as his Lordship then was) in Ministry of Defence v Ashman[17]:

“A person entitled to possession of land can make a claim against a person who has been in occupation without his consent on two alternative bases. The first is for the loss which he has suffered in consequence of the defendant's trespass. This is the normal measure of damages in the law of tort. The second is the value of the benefit which the occupier has received. This is a claim for restitution. The two bases of claim are mutually exclusive and the plaintiff must elect before judgment which of them he wishes to pursue. These principles are not only fair but, as Kennedy LJ demonstrated, well established by authority.”

(3) In the present case, the plaintiff used the words “mesne profits” and “losses and damages” in its Statement of Claim. The plaintiff made no mention of “restitution” or “unjust enrichment” there. It is therefore a clear (or deemed) election of the plaintiff that it would base its claim on tort, instead of restitution. In this respect, I reject Ms Pang’s submissions at the hearing that the defendant had been unjustly enriched by the services provided by the management company at the expense of the plaintiff.

(4) Insofar as the tortious claim is concerned, it is trite that the compensatory aim is, and should be, to put the claimant into as good a position as if no tort had been committed. Furthermore, the claimant must establish a causal link between the defendant’s wrongdoing and the claimant’s losses.

(5) I am satisfied that the plaintiff suffered loss and damages in terms of mesne profit in the consequence of the defendant’s wrongful occupation of the Premises after the end of the Tenancy Agreement.

(6) However, in my view, the plaintiff’s liabilities to pay the management fee and air-conditioning charges, as well as the government rate, exist independent of the defendant’s wrongful occupation of the Premises. In the present case, the plaintiff’s entitlement to claim against the defendant for such items was derived from the Tenancy Agreement, notably clauses 5.2(b) and 5.3 thereof, whereby the defendant agreed to indemnify the plaintiff of such expenses. For my part, I cannot see how such an entitlement of the plaintiff could have survived after, or otherwise extended beyond, the currency of the Tenancy Agreement. Contrary to what was submitted by Ms Pang in the plaintiff’s opening submissions[18], it cannot be said that the plaintiff’s payment of the management fee and air-conditioning charges, as well as the government rate, is the natural consequence of the defendant’s trespass. Indeed, Ms Pang accepted at the hearing that it was the plaintiff’s personal liability to pay such expenses after the expiration of the Tenancy Agreement. Accordingly, in my judgment, the causation requirement is not satisfied.

(7) At the hearing, Ms Pang argued that the defendant’s wrongful occupation of the Premises would deprive the plaintiff of the opportunity to rent out the Premises, and thereby the plaintiff had lost the chance of being reimbursed for such expenses by the new tenant. With respect, I am not able to accept this argument. In my view, this argument fails on the facts of this case. There is no evidence before me that, had the defendant not committed the wrongful occupation, the plaintiff would have a high chance to rent out the Premises during the period of such wrongful occupation. In fact, evidence shows the contrary that the plaintiff was only able to secure another tenancy in November 2020, which was about 6 months after the defendant’s abandonment of the Premises. Accordingly, it cannot be said that the plaintiff would have been entitled to any reimbursement of the expenses, had the defendant not committed the wrongful occupation.

(8) For the aforesaid reasons, I reject the plaintiff’s claim in respect of the management fee and air-conditioning charges, as well as the government rate.

25.  As it was confirmed by the plaintiff that it had suffered no reinstatement costs, there would be no award under this head.

26.  Accordingly, I assess the total amount of the plaintiff’s damages in a total sum of $203,225.81, being the mesne profits for the period between 26 March 2020 and 13 May 2020.

27.  Final judgment is to be entered in the plaintiff’s favour at the said amount.

INTERESTS

28.  Ms Pang submitted that the plaintiff should be entitled to the pre-judgment interests calculated from the date of the writ (ie 28 April 2021) at 1% above the prime rate[19].

29.  In considering the award of pre-judgment interest, I bear in mind the basic principle that interests are awarded to the plaintiff to compensate for being kept out of the money which ought to have been paid by the defendant[20]. In light of this, I find Ms Pang’s submission reasonable. I would award pre-judgment interests from 28 April 2021 at 1% above the prime rate until the date of this assessment.

30.  The plaintiff shall also be entitled to interests thereafter at the judgment rate until full payment.

COSTS

31.  Since the plaintiff is able to obtain a judgment for more than a nominal sum, it should be entitled to costs. According to the statement of costs, the amount incurred by the plaintiff was $89,937, and the fee earners have spent a total of 31.5 hours in handling this case.

32.  With respect, I find that there are rooms for reduction. Having regarded the nature and complexity of the application, as well as the proportionality principle, I am of the view that 20 hours at the nominal rate of $3,000 per hour in total should be sufficient for the plaintiff’s solicitors to properly handle the present action. I would award the costs of manual work (Item B) and other disbursements (Item E) in full.

33.  Accordingly, by a broad-brush approach, I summarily assess the plaintiff’s costs of this action at $64,392 (ie, $2,652 + ($3,000 per hour x 20 hours) + $1,740).

DISPOSITION

34.  For the above reasons, final judgment is entered in the plaintiff’s favour against the defendant in the sum of $203,225.81, together with interests accrued thereon at 1% above the prime rate of HSBC from 28 April 2021 to the date of this assessment, and thereafter at the judgment rate until full payment.

35.  I also order that the defendant do pay the plaintiff’s costs of this action, including this assessment of damages, summarily assessed at $64,392, payable forthwith.